Investor exuberance spread across European bond markets yesterday as Greece’s successful five-year debt sale helped send yields lower across fellow peripheral countries.

Government borrowing costs fell in crisis-hit Portugal, Italy and Spain as well as in France and Germany after the Greek bond was priced to yield less than 5 per cent.

Yields in Ireland’s benchmark bonds hit a record low after the country completed the €1 billion sale of 10-year bonds at 2.91 per cent.

“We can’t say that the eurozone crisis is dead and buried but the fact that Greece managed to sell its debt so easily at a lower than expected yield demonstrates the scale at which investors are moving back into Europe,” said David Owen, chief European financial economist at Jefferies, the investment bank.

Greece raised €3 billion in a five-year deal that attracted more than €20 billion in orders, just two years after defaulting on its debts.

One person close to the deal said there had been more than 600 different investor accounts placing orders. The yield was confirmed at 4.95 per cent – below analyst predictions.

The sale puts Greece one step closer to escaping the constraints of its rescue programme and the reforms demanded by lenders.

Antonis Samaras, Greece’s prime minister, said the country had taken a decisive step towards exiting the crisis. “International markets expressed their confidence in the Greek economy in a way that cannot be questioned.”

Governments in Europe’s periphery have moved to take advantage of low borrowing costs as investor worries over the region’s future dissipate. Greece’s return to global capital markets follows similarly successful debt sales by Ireland and Portugal, both of which were also bailed out by their European neighbours.

Poul Thomsen, who heads the IMF’s programme on Greece, welcomed the government’s desire to start raising money. “It’s a fundamental objective of the programme to bring Greece back to market and this is an important milestone in this regard and it clearly speaks to the success of the programme,” he said.

The unexpected scale of bond-buying appetite met with scepticism from some investors who pointed out that Greece’s high levels of debt remain worrying.

The celebratory mood was damped by violence when a car bomb exploded in central Athens early yesterday.

(Copyright The Financial Times Limited 2014)